The UK Manufacturing PMI stood at 51.9 in July. This is lower than the average of 54.3 for the current period of growth from April 2013 says Markit/CIPS, but is still slightly higher than the long term average since Jan 1992 of 51.5. The July PMI is also up on June’s 26 month low of 51.4.

Commenting on the figures Martin Beck, senior economic advisor to the EY ITEM Club, said:

Although the CIPS manufacturing PMI edged up in July, it remains some way short of the pace seen for much of the past couple of years. The detail of the survey also painted a relatively gloomy picture, with growth in new orders slowing to a ten-month low. While the domestic economy remains a source of strength, particularly in terms of demand for consumer goods, the external weakness has become firmly entrenched. The exchange rate is central to this story, with sterling having appreciated by more than 11% against the euro since the beginning of the year. This movement has been damaging to competitiveness and has more than offset any gains from a stronger Eurozone economy.

Manufacturing sparks (PD)Today’s data represented a disappointing start to Q3 and is consistent with manufacturing output being broadly flat. Wednesday’s services survey will provide a firmer steer towards the likely strength of GDP growth through the summer, but the manufacturing survey suggests that the two-speed economy remains a key theme.

The survey provided ammunition for both camps on the MPC. Those of a hawkish persuasion may have been concerned by the pickup in selling prices. However, the majority are likely to have been heartened by the renewed decline in input costs, which suggests that inflationary pressures are unlikely to escalate over the coming months. While it is perfectly possible that we will see two, or maybe even three, votes in favour of an interest rate hike on Thursday, in our view the chances of a move this year remain low.

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